Will democracy take root and grow on new soils? The question is pressing as several authoritarian regimes have fallen over the last couple of years – and as the yearning for freedom increasingly resonates across the world. What will it take for these efforts to succeed? Most observers focus on the politics of democratization. Yet, as important as these may be, success will also largely depend on whether the new leaderships can transform the economy, redefine the role of the State, and help people get a better life.
Poland has gone along this path over the last two decades. It is a source of inspiration and encouragement for those who are aspiring to democracy: a successful political transition but also the transformation of a near-bankrupt State into a flourishing economy.
Of course each country is a special case. The success of Poland’s transformation was first and foremost about people: the extraordinary individuals who steered the process, and the Polish people themselves, who showed both unity in rejecting the past and determination in moving ahead. True, Poland had some strengths to build upon: a cohesive society (in which the Catholic Church played an important role), a private sector-led agriculture, and an entrepreneurial population. The economic freefall of the 1980s also facilitated the acceptance of difficult reforms. Yet the challenges were humongous.
Are there lessons that other countries can draw from this Polish experience? Are there lessons that can help others design their own path towards economic transformation, as an essential component of the democratization process?
The first set of “Polish lessons” is for the democratizing countries themselves – or for those who are preparing for an eventual democratization.
The Polish experience can help think through some of the key questions reformers are facing. What should be the first steps of a “newly democratic” leadership? How to anchor the transformation and make it irreversible? What can be learned from others?
Start with the hard stuff. The temptation to procrastinate is always there. Democratizing governments may sometimes believe that their societies which are going through a series of shocks need to be sheltered from further dislocations. The Polish experience shows the opposite. The “honeymoon” of early democratization is the time to engage in difficult reforms – simply because these are unavoidable and will be even harder later on. And don’t go half-way: the political price to pay will be the same. Political courage pays off.
Remove the rents. In the early 1990s, Poland chose to abruptly free up prices and open the economy to foreign competition. This did not go without pain, especially until a safety net was put in place, but it eventually resulted in the establishment of a successful market economy. In some other countries we saw the reverse: a process that was too gradual to weaken the entrenched interests that had flourished under the authoritarian regime, or a chaotic withdrawal of the State that resulted in the well-connected grabbing assets… and putting an early end to the democratization experiment. While specifics vary, many democratizing countries are facing distorted economic regimes: the Polish experience is an encouragement to tackle these heads on – in a well-considered manner.
Commit to macroeconomic stability. Poland’s experience, its successes and its difficulties over the last two decades demonstrate the importance of a steady management of the economy. Poland was the only EU country to avoid a recession in 2008-2009, and despite the current turbulences in the eurozone it is still expected to be among the fastest-growing EU members this year. Sound fiscal and monetary policies matter – as well as the commitment and professionalism of those who implement them.
Build up counterweights in the executive. Strong, independent economic institutions have proven instrumental to staying the course and sustaining economic policy in the midst of a complex democratization process. The National Bank of Poland is a clear illustration of this point, from its role in the early 1990s, to its advocacy for fiscal discipline in the late 1990s, to its current contribution to mitigating the impact of the European crisis. Similarly, the decentralization of responsibilities to self-governments, first on fiscal matters, and later in areas such as health or education, has created a stronger framework for economic governance. Each country is different, but democratization will stand a better chance to succeed if there are checks and balances within the executive.
Learn from specific Polish successes. Poland is rightly proud of its success in a number of areas. These have not yet been “mapped” systematically, but examples abound. Poland has successfully implemented a series of fiscal reforms, and of changes in social protection. It has developed a solid financial sector, with a strong supervision framework. It has severely reduced the incidence of corruption. It is the country that has made most progress in the quality of secondary education within the OECD. It has put in place effective arrangements to implement investment projects, at national and subnational levels. In each of these areas – and in many others – there is a wealth of experience from which others can learn.
And be ready for the long haul. The transformation was not completed in a few months: in fact, Poland has been continuously reforming since 1989 ! And in spite of the tremendous success of the past two decades, it still has a long way to go to converge with its Western neighbors – and in the short-term to sustain the ongoing efforts to reduce the fiscal deficit, to further strengthen the business environment, and to implement a number of structural reforms. For those who hope for an overnight transformation, the Polish experience highlights the importance of patience and perseverance.
The other set of lessons is for those countries who aim to support democratization efforts abroad – including Poland itself.
Poland’s transformation did not happen in a vacuum. It benefited from a huge amount of international support. And while the Polish people carried most of the burden, external partners made three contributions that proved critical for success. Today, Poland is well placed to emphasize this message to its allies.
An external anchor. Revolutions are turbulent times. People expect to see rapid changes, and yet it takes years to improve living conditions. As hopes and frustrations collide, the democratization process can become somewhat chaotic. The experience of Poland, and of other Central European countries, has been different. The clear perspective of joining the EU, the social consensus around this objective created an environment that minimized turbulences and made it possible to steer the country in a relatively steady manner. The importance of establishing international partnerships that can provide such an “external anchor” for the democratization process can hardly be overstated.
Trade agreements. Poland’s partnership with the EU in the 1990s and its joining of the EU in 2004 opened huge opportunities for the private sector. It boosted trade and investment. It spurred institutional and regulatory modernization through the “acquis communautaires”. It transformed the structures of the economy in ways that went beyond imagination. This experience highlights the transformative role trade agreements can play for democratization – when the political conditions are right.
Aid. There is a temptation to believe that democratization can be achieved on the cheap. Poland’s experience shows that this is not the case. The country benefited from substantial debt relief and aid in the 1990s, and to this day it is the largest recipient of EU Structural Funds. The impact of these resources is visible, and they financed the infrastructure that underpinned the economic transformation. Let’s highlight that what mattered was aid, but also the way Poland used it: setting sound priorities for investment, engaging with stakeholders, implementing projects effectively, minimizing the impact of corruption… – yet another set of Polish lessons!
Poland has a lot to share – and to contribute! Poland has emerged as a powerful voice for democratization, in its immediate neighborhood, on the other side of the Mediterranean Sea, and across the world. Among those who advocate and support democracy, Poland may well be one of the very few countries that can provide advice and share lessons not only from books and academic theories, but from actual experience, from the travails of real life. This gives the country a very special responsibility – and a very special role in helping the new democracies succeed.
